The lease agreement is classified as a civil agreement and constitutes the foundation for regulating the legal relationships between lessors and lessees in the Kingdom of Saudi Arabia in a balanced and equitable manner. The lease agreement outlines the rights and obligations of the contracting parties, thereby promoting stability and transparency in transactions. Thanks to recent legislation in the Kingdom, particularly the Civil Transactions Law, legal protection for lease agreements has been enhanced, contributing to the stability of the real estate market and ensuring a safe and efficient leasing environment. This is in alignment with the goals of Saudi Arabia's Vision 2030, which seeks to develop the legislative framework and improve the quality of life. In this regard, this article will discuss the legal protection afforded to both lessors and lessees under the lease agreement, in accordance with the provisions of the Civil Transactions Law.

What is the Lease Agreement in Saudi Arabia?

Under the Civil Transactions Law, Lease is a contract that enables the lessor to provide, in return for rent, a non-consumable thing to a lessee to use and enjoy for a specified period. In other words, the lease agreement is a legal agreement between two parties in which the lessor grants the lessee the right to use a property or asset owned by the lessor for a specified period, in exchange for an agreed-upon financial amount. The agreement also set forth clear terms and conditions that specify the rights and obligations of both parties, such as the term of the lease, the rent amount, and the conditions for use and maintenance. The purpose of the lease agreement is to protect both the lessor and the lessee, ensuring that each party adheres to the agreed-upon clauses to avoid legal disputes.

Terms and Conditions of Lease Agreement in Saudi Arabia

The Civil Transactions Law establishes some conditions and regulations that shall be adhered to when entering into a lease agreement. These include:

- Regulations of the Leased Premises in a Lease Agreement

The leased premises, whether a specific thing or a thing of a specific type, may be a property, usufruct, or right. It may be a common share.

- Regulations for Determining Rent in a Lease Agreement

Rent may be determined on the basis of valid pricing criteria, or may be a specific amount together with a known percentage of the output or the profit. A lease contract may stipulate that the rent be paid in advance, be deferred, or be paid in installments.

If the lease contract is concluded for a specific item that comprises multiple units and the rent is for the total units without specifying the rent for each unit, and it is found that the number of units is more or less than the number stated herein, the rent shall be as specified in the agreement without any increase or decrease. In case of the number of units is less than the units stated in the contract, the lessee has the right to demand termination of the agreement.

However, if the rent for each unit is specified in the agreement, the lessee shall, in the case of extra units, pay the rent specified for such units, and the lessor shall, in the case of missing units, reduce the rent for such units. In both cases, the lessee may request termination of the agreement. If the decrease or increase in the number of units is insignificant and has no effect on the intended usufruct, the lessee may not demand termination of the agreement.

- Regulations for Determining the Lease Term

If the lease term is not specified and the rent is based on a time unit, the lease shall be deemed valid until the end of such unit. Otherwise, the court shall determine the lease term according to custom and the circumstances of the agreement. The term of a lease agreement may be determined based on a future event. If the lease term expires and there is an urgent need to extend it, such term shall be extended only to the extent of such need, provided that the lessee pays the rent of a similar thing for such period, unless otherwise agreed.

Lessor's Obligations under a Lease Agreement

The lessor's obligations are governed by the legal protections set forth in the Civil Transactions Law, which ensures the safeguarding of both the lessor's and lessee's rights, thereby preventing potential disputes. Notably, the law outlines several key obligations for the lessor, including the following:

- Delivery of Leased Premises

• The lessor shall deliver the leased premises and its appurtenances in a condition that allows full use and enjoyment of such thing.
• Delivery shall be made by enabling the lessee to take the leased premises without any hindrance. Such enjoyment shall remain in effect until the lease term expires.
• The lessor may refrain from delivering the leased premises until the lessor receives the rent payable in advance.

- Necessary Repairs and Maintenance

• The lessor shall carry out the necessary repairs to keep the leased premises suitable for its intended use, including fixing any defects that affect the lessee's ability to enjoy the property as agreed.
• If the lessor fails to perform the repairs after being notified, and without prejudice to the lessee's right to request termination or a reduction in rent, the lessee may obtain permission from the court to carry out the repairs. The lessee may then seek reimbursement from the lessor for the reasonable costs incurred. Additionally, the lessee may, without court approval, carry out repairs and deduct the cost from the rent if the repairs are urgent or are of a minor nature according to custom. In all cases, the lessee must provide the lessor with an itemized account of the repairs made.
• If the lessee, with the lessor's consent, carries out construction or repairs for the benefit of the leased premises, the lessee has the right to be reimbursed for the reasonable costs incurred, even if the lessee did not expressly agree to such reimbursement, unless otherwise agreed.
• If the lessee's improvements are for their personal benefit, they are not entitled to seek reimbursement from the lessor, unless otherwise agreed.

- Destruction of the Rented Property

• If the rented property is completely destroyed during the term of the lease, the agreement shall be automatically terminated.
• If the rented property is partially destroyed or becomes in a condition that significantly reduces its usefulness for the purpose for which it was rented, and such destruction was not caused by the lessee, the lessee may request the termination of the agreement or a reduction in the rent.

- Guarantee of Non-Interference with the Lessee's Possession

• The lessor shall refrain from interfering with the lessee's enjoyment of the property throughout the term of the lease, including making alterations to the property that prevent its use or diminish its intended benefit. Otherwise, the lessor shall be deemed liable therefor. Interference by the lessor’s agents or servants shall be considered as interference by the lessor himself.
• The lessor guarantees the lessee against interference by third parties if such interference is based on a legal cause.
• The lessor does not guarantee the lessee against interference by third parties if the interference is not based on a legal ground. However, if the interference arises from a cause beyond the lessee’s control and results in depriving the lessee of the use of the property, the lessee may request the termination of the agreement or a reduction in rent.
• If an action by a public authority results in a reduction in the lessee’s enjoyment of the property, the lessee may request the termination of the agreement or a reduction in rent, without prejudice to his right to seek compensation from the lessor if the action by the public authority was based on a cause for which the lessor is responsible.

- Defects Guarantee

• The lessor shall guarantee the lessee against any defects in the rented premises that hinder its use or diminish its intended benefit.
• The lessor shall not be liable for defects that are customarily tolerated or for those of which the lessee was aware at the time of contracting.
• If a defect causes the lessee to be wholly or partially deprived of the use of the leased premises, the lessee may request termination of the agreement or a reduction in rent, without prejudice to the lessee’s right to claim compensation.
• Any agreement that exempts or limits the guarantee of non-interference or defects shall be considered void if the lessor intentionally concealed the cause of such guarantee.

Lessee's Obligations under The Lease Agreement

The Lessee's obligations are governed by the legal protections set forth under the Civil Transactions Law, which ensures the safeguarding of both the lessor's and lessee's rights, thereby preventing potential disputes. Notably, the law outlines several key obligations for the lessor, including the following:

- The Agreed Rent Payment

• The Lessee shall pay the rent on the agreed-upon dates. If no such dates are agreed upon, the rent shall be paid upon handing over the Leased Premises. Thus, if the Lease Agreement Term is divided into time periods, the Lessee shall pay the Rent at the beginning of each period.
• The rent shall not be due for any period which lapsed before delivering the Leased Premises, unless the handing over was delayed due to the Lessee.

- Preservation of the Leased Premises

• The Lessee shall exercise ordinary diligence in preserving the Leased Premises.
• Furthermore, the Lessee shall compensate the Lessor for the damages caused to the Premises arising out of the Lessee’s transgression or negligence. In case multiple Lessees share the same Premises, each Lessee shall compensate the Lessor for the damages caused to the Premises arising out of each Lessee’s transgression or negligence.

- Use the Leased Premises for the Agreed Purpose

• The Lessee shall use the Leased Premises within the limits agreed upon in the agreement. In the absence of any such agreement, the Leased Premises shall be used as they are currently configured.
• Additionally, the Lessee may not make any alteration to the Leased Premises without obtaining the Lessor’s consent, unless such alteration is necessary for the repair of the Leased premises and does not cause harm thereto.

- Maintenance of the Leased Premises

• The Lessee shall maintain the Leased Premises within the Lease term according to the custom, unless otherwise agreed.
• The lessee may not prevent the lessor from carrying out the repairs necessary for the maintenance of the Leased Premises if the lessee is notified in a timely manner prior to the lessor’s commencement of such repairs.

- Handing Over the Leased Premises upon Expiration of the Lease Agreement Term

• The Lessee shall return the Leased Premises upon expiration of the Lease Agreement, excluding the ordinary use provisions.
• In case the Lessee unrightfully retains in his possession the Leased Premises, the lessor shall be entitled to a similar rent without prejudice to any other compensations.

- Alterations of the Leased Premises

• If the lessee adds for his benefit structures or plants to the Leased Premises even with the lessor’s permission and the lessor and lessee did not agree that such additions will remain in place after the lapse of the lease term, the lessor may, at the end of the lease contract, demand removal of the same at the lessee’s expense, together with compensation, if applicable. The lessor, however, may keep such additions against payment of their value as removed or payment of the amount of appreciation of the Leased Premises due to such additions.
• The Lessee may demand the removal of the structures or plants he added, provided that such removal does not cause damage to the Leased Premises, even if the Lessor objects.

- Leasing the Leased Premises

• The lessee shall not sublease the Leased Premises in whole or in part without obtaining the permission or consent of the Lessor.
• The lessee who is permitted to sublease the leased premises or assign the contract to a third party shall be bound by the same terms and conditions as the original Lessee in terms of the nature and duration of the Leased Premises interest.

Lease Agreement Termination

The Lease Agreement shall terminate upon the expiration of the term stipulated therein unless the Agreement shall be automatically renewed. In case the Lease Agreement terminates, and the Lessee continues benefiting from the Leased Premises with the Lessor’s explicit or implied consent, the Agreement shall be entered with the same terms and guarantees, excluding the guarantees provided by Third Parties. Additionally, the terms of the new Lease Agreement shall be stipulated.

Nevertheless, in case the Lessor demands the Lessee to increase the agreed rent, and the Lessee continues benefiting from the Leased Premises after the expiration of the Lease Agreement without objecting to such increment, the Lessee shall pay such increase as of the termination of the said Agreement. Furthermore, the Lease Agreement shall be reentered with the same terms and guarantees, excluding the guarantees provided by Third Parties. Additionally, the terms of the new Lease Agreement shall be stipulated.

The Lease Agreement shall not be terminated upon the death of one of the Parties. The Heirs of the Lessee are entitled to terminate the Agreement within a reasonable duration in case they prove that they can not bear the Agreement’s burdens arising from the death of their deceased; the Agreement exceeded the limits of their need or the Agreement conducted based on considerations of their deceased. The Lessor is entitled to terminate the Lease Agreement in case the Lessee dies, and the Agreement was made based on considerations of the deceased.

Lease Agreement Services in Riyadh

Given the importance of the Lease Agreements within the real estate and housing transactions, Dr. Fahad Alrefaei & Partners Consulting & Law Firm provides a vast group of legal services covering various legal aspects, including formulation of agreements, conflict settlement or compliance with local and international laws and regulations. These are the key legal services pertaining to Lease Agreements:

• Lease Agreements Formulation
• Registering Lease Agreements electronically on the EJAR platform
• Legal Consultations on the rights and duties of Lessees and Lessors
• Settling conflicts arising out of Lease Agreements

For Lease Agreements Services in Riyadh, please contact Dr. Fahad Alrefaei & Partners Consulting & Law Firm at 920012753 or via [email protected]
We are pleased to assist you.

Please find: Lease Agreements Services